Wanted to see if anyone has experience working at a hard money / bridge lender. I am evaluating an offer and would appreciate any insight.
In general, they have a $300mm fund and complete non-recourse 2% origination fee 10% interest loans nationwide.
What is it like to work in this space? Can you be successful? What type of person is successful?
This would be a big move from institutional quality real estate to $3-15mm loans. Any insight is appreciated.
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High yield funds can be cool but 10% and 2 point money is all over the market. Alot of these shops do development,work outs and other riskier transactions and try to get yields associated with the higher risk profile. However pricing generally starts at L+550. There are large debt funds that play in the space like madison realty capital or square mile on larger deals over $25 Million and are accepted solutions for higher leverage riskier deals. However on the smaller side of the bussiness the barrier to entry is relatively low as most funds lever their loans on the backend and there is a ton of competition in the lower middle market. PM me the name of the firm you are thinking about going to and I can tell you what I think. I run a capital markets group focused exclusively on middle market bridge and transitional transactions.
Is MRC the real deal or are they low-key predatory lenders?
MCR is The Real Deal. They take stuff back but so do most lender. I think if you sign a contract be prepared to get screwed if you can't make your business plan work. MCR goes full stack for a lot of clients and when you are highly levered you need to take control to protect your investors. REPE shops brag to investors all the time about how they can seize properties in certain cases in 90 days or less.
I'd be interested to know more about your capital markets business. Do you broker out middle market bridge and transitional deals? Do you focus on any other loans as well?
I really wouldn’t be comparing Square Mile Capital to Madison Realty Capital. SMC is a lower cost debt fund doing construction and bridge. MRC is a straight hard money lender. They just happen to market themselves well and have a lot of deal flow. Sure, they are the “real deal” in the hard money space, but this is also the hard money space you are talking about...
Personally, although interesting, I would veer away from hard money lending which sounds like the shop you’re looking at given their pricing structure (10% and 2% upfront). The work is very high level and removed from the real estate. If you enjoy the debt side than this could be an interesting play given the amount of structure involved in these deals.
Find out what their niche is. Like REfutureseee just said, lots of players with this product. By niche, I don't mean bridge or quick close...I'm talking about something special. A buddy of mine does 5yr years and I/O in the low 8's. Clearly, his 5yr note is appealing to many versus your standard 12-18mo note.
What about being asset class agnostic and working with prior foreclosure / bk borrowers? Is that niche enough?
Standard for private money.
Whats the typical compensation for a position like this? Assuming you are originating and underwriting.
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